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Small = Weak = Helpless

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March 03, 2008 – Comments (0)

So, It seems there is some butt kicking going on involving Freddie and Fannie and some unidentified Home Appraisers and my very own NY State Attorney General, Andrew Cuomo.

And a good thing it is too. It seems that during the past few years there may have been some less than accurate home appraisals performed by some less than courageous home appraisers in order to keep their less than earned fees working for some less than honest mortgage brokers. Apparently this happens all the time. So much so that it is seen as actually having contributed to what some people are claiming is a mispricing of housing assests. In fact some people believe that Freddie and Fannie would not have been able to lend $400,000 to buy a house that someone was trying to sell for $400,000 if they had learned that that house was actually only worth $250,000. This puts a lot of the current mortgage/homebuilding/banking problems squarely on their backs as being their responsibility. Or at least it seems to indicate that they had some responsibility for preventing this problem. 

Sorry, let me get back to the butt kicking.

Now it is clear that fraudulently causing (m)(b)(t)rillions of dollars of losses, the loss of confidence in the banking system and the loss of confidence in state and local bonds should come with some pretty serious ramifications (ramifications is a big word for "butt kicking" and the word serious suggests "a really good butt kicking" or perhaps a "really memorable, within an inch of your worthless life buttkicking").  Now it also seems that this problem was not isolated to a few small lenders or character lacking appraisers. It seems that this problem is so industry wide that the only solution is to seperate the guilty partys. Mortgage brokers cannot be allowed to talk to appraisers because the brokers cannot resist trying to corrupt the appraisers and the appraisers cannot resist being corrupted. And AG Andrew Cuomo promised not to mention it again. Which means no matter what he finds out they have actually done no further punishment will be forthcoming. Apparently that is considered to be the "butt kicking". Now in my house "go to your own rooms until you learn how to act" is an appropriate "butt kicking" for two children who could not take turns and broke the toy grabbing for it. But that wouldn't stop me from adding to their punishment if I found another toy broken. However, if I came home and found every window in the house broken, holes in the wallboard and doggie poo clinging to the ceiling a more serious "butt kicking" might be in order. For instance loss of privileges might be in order. The mortgage brokers and appraiser could lose the privilege of being mortgage brokers and appraisers. Grounding is also good. Perhaps the brokers and appraisers could be grounded to some small sparsly decorated rooms with no TV for a fixed period of time in order to reconsider the error of their ways.

Now in my house I can enforce what I consider to be good behaviour because I am bigger and stronger than my kids.

In order for AG Andrew Cuomo to enforce good business practices he needs to be bigger and stonger than the people he is enforcing. He needs investigators and attorneys and a budget that can supply these things. But the NY State AG's office was unable to correct these problems when the problem was small, so it grew and now it is big. So instead of the problem involving a few brokers and appraisers the problem has come to involve almost all the brokers and appraisers. And the AG's office is to Small = Weak = Helpless and cannot enforce good behaviour. All he could do is make them promise to stop. But the bad kids are still out there. And having not been punished, they will do it again. It was rewarding. So what AG Andrew Cuomo needs is to be on the alert for corruption. Actually he needs the resources to go looking for it. Because the appraisers will still go to lunch with the brokers. And the brokers will pay for lunch. And businessmen will not change unless they believe their lives might be disrupted by jail time. And it wasn't. It rarely is. And the brokers need a very scarey poster child for what happens to next broker/appraiser pair that cheats. But they will not get one. Because if the appraisers stop cheating and actually price housing for what it is really worth and the banks have to mark to that market... no soft landing for us. Andrew Cuomo has to leave the barn door labeled "no enforcement" open, so the horses can get back in.

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